No tax in Hong Kong - Offshore operation tax exemption - Service providing business
Background- Mr. A is a French who knows many businessmen doing jewellery business all over the world;
- These businessmen will pay Mr. A service fee every time when Mr. A refers them the customers;
- Mr. A originally using his own French company to act as the middle man to link up these businessmen with the customers he found;
- Mr. A controls the business remotely – no need to maintain operation base in France;
- Profit of Euro 50,000 is subject to French tax rate - can be as high as 40%.
New arrangement- Mr. A setup a Hong Kong company, H Ltd;
- H Ltd becomes the middle company – to link up customers he found with the jewellery businessmen all over the world;
- Referral service is delivered to the jewellery businessmen like before;
- Location of operation - Mr. A still operating the business - without maintaining operating office in Hong Kong and France.
Benefit- Profit of Euro 50,000 will be profit of H Ltd;
- As H Ltd maintains only register address in Hong Kong, but not operating office. And also fulfilling offshore operation test, Hong Kong tax department (Inland Revenue Department) (IRD) approves the "non-HK source" application;
- There is saving of 40% in profits tax.
| Important : Overall Tax Position |
Mr. A still needs to fulfill personal income tax filing to French government – in order to assess overall tax saving scenario. |
| Important : Offshore operation tax exemption in HK |
H Ltd should fulfill operation test, which include below : - No operation office maintaining in HK (this is different from register address);
- No staff hired and working in HK;
- No customers / clients from HK;
- The service which give rise to the serivce income is not performed in Hong Kong.
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